FHA to Continue Lending During Shutdown

Applications for all government-backed mortgages will continue to be processed during a government shutdown, according to the U.S. Dept. of Housing and Urban Development (HUD).

HUD originally said on Friday that it would stop working on applications for loans guaranteed by the FHA if the government shutdown. However, it reversed that position over the weekend.

HUD said it will continue processing loans "in order to support the health and stability of the U.S. mortgage market."

Fannie Mae and Freddie Mac also said their operations will be unaffected by the shutdown. The GSEs pay for their operations out of the fees collected from lenders.

FHA to hike premiums on mortgages

from CNN Money

The Federal Housing Administration, which is the largest insurer of low-down payment mortgages, announced last week that it will raise premiums by 10 basis points, or 0.1 percent, on most of the new mortgages it insures.


Here’s the highlights:

• A borrower opting for a 30-year, fixed-rate mortgage who puts down 5 percent or more will now pay an annual insurance premium of 1.3 percent of their outstanding balance. Someone who puts down less than 5 percent will pay a premium of 1.35 percent.
• The FHA said it also will raise premiums for borrowers with jumbo loans – loans of $625,000 or more – by 5 basis points, and increase the minimum down payment requirement on these loans to 5 percent from 3.5 percent.
• Additionally, the FHA said it will require most buyers to pay insurance premiums for the life of their loan. A policy that was put in place in 2001 allowed borrowers to cancel premium payments once their debt fell below 78 percent of the principal balance. One exception will be for borrowers who put more than 10 percent down at the time of purchase.
• Other new policies include a requirement that any mortgage for an applicant with less than a 620 credit score and debt-to-income ratio above 43 percent must be underwritten manually. Lenders who want to issue loans to these applicants must be able to adequately document why they decided to approve the loans.
• The FHA also decided to put new restrictions on reverse mortgages, no longer permitting retirees to take such large, upfront payments.

Read the full story

Changes to Mortgage Insurance Premiums

This information was just released by HUD, regarding FHA, and in particular FHA’s Mortgage Insurance Program requirements.

FHA will increase its annual mortgage insurance premium (MIP) for most new mortgages by 10 basis points or by 0.10 percent. FHA will increase premiums on jumbo mortgages ($625,500 or larger) by 5 basis points or 0.05 percent, to the maximum authorized annual mortgage insurance premium. These premium increases exclude certain streamline refinance transactions.

FHA will also require most FHA borrowers to continue paying annual premiums for the life of their mortgage loan. Commencing in 2001, FHA cancelled required MIP on loans when the outstanding principal balance reached 78 percent of the original principal balance. However, FHA remains responsible for insuring 100 percent of the outstanding loan balance throughout the entire life of the loan, a term which often extends far beyond the cessation of these MIP payments. FHA’s Office of Risk Management and Regulatory Affairs estimates that the MMI Fund has foregone billions of dollars in premium revenue on mortgages endorsed from 2010 through 2012 because of this automatic cancellation policy. Therefore, FHA will once again collect premiums based upon the unpaid principal balance for the entire period for which FHA is entitled. This will permit FHA to retain significant revenue that is currently being forfeited prematurely. Read FHA’s new MIP Mortgagee Letter 

Home Prices Trending Up; Mortgage Rates Hit New Lows

By Gino Blefari, President & CEO, Intero Real Estate Services, Inc.

What better end to the year could housing ask for? Home sales and prices are up on average across markets. Inventory is low, but housing starts are up. Mortgage rates remain at rock bottom – and the Fed said at its meeting this month that it doesn’t anticipate raising rates any time soon.

The stars have aligned. The door to recovery is now wide open.

The September Home Price Index tracked by Lender Processing Services showed a 3.6% year-over-year increase since last September. In addition, the index rose 4.9% since the beginning of the year.
California and New York led the states with a 0.4% month-over-month increase, and Washington, D.C. led metros with a 0.6% increase from August. The largest monthly increases in the home price index took place in Arizona, Washington, D.C., Georgia, Delaware and Maryland, with Arizona holding the largest year-to-date increase at 14.4% since January.

In mortgage rates, we continue to see fantastic borrowing rates for home buyers. Average rates on a 30-year fixed-rate mortgage hit a new low of 3.31% last week, and average rates on a 15-year fixed-rate mortgage also hit a new record low of 2.63%, Freddie Mac said in its latest weekly report.

In its quest to use monetary policy to help the recovery, the Federal Reserve board indicated at its
November meeting that it would not be raising rates in the foreseeable future. In fact, Fed Chairman Ben Bernanke suggested that the Fed will keep trying to push down long-term interest rates through
2013.

As we enter 2013, inventory will be of concern in many markets that have struggled to keep up with demand. But things will be looking up next year in most markets. In fact, Daren Bloomquist of RealtyTrac said at a housing symposium in San Francisco this month that underwater homeowners are more likely to sell as prices rise next year, which will help inventory levels.

At the same symposium, Ken Rosen, an economics professor at UC Berkeley, declared housing is in recovery mode now and through next year, though he’s not anticipating a boom in sales.

Things to watch next year will be jobs and income levels, both of which have the strongest impact on housing than any other indicator.

The forecast, overall, is looking optimistic for real estate. Some markets, like ours here in Silicon Valley are already enjoying near-peak activity and pricing. Others are just starting to pull themselves up. Either way, 2013 is going to be a solid year for housing.

Recovery for Former Homeowners

The recent San Jose Mercury News article about foreclosure victims buying again is good news all around. As we all know, Americans want to be homeowners. And they want to own a home so much that they forget about the pain and sadness their last experience caused. So, for many, just three years later they are ready with their down-payment and their moving boxes, and they’re saying, “Let’s do it again!”

Fortunately, there are ways to accomplish home-ownership for these people with the help of the government backed programs like FHA. Read the article, and if you’re ready to be a homeowner again, contact us and we’ll get you on your way.

FHA gives jobless homeowners one-year break

News Flash from CAR (California Association of Realtors)

Beginning Aug. 1, the Federal Housing Administration will extend the period for unemployed homeowners to miss mortgage payments from four months to a full year, providing qualified homeowners with more time to find employment before the foreclosure process begins. Here are the "Cliff Notes"...

• The new Special Forbearance program falls under the FHA’s Loss Mitigation program, which FHA-approved servicers must participate in. 
• The extended grace period only applies to FHA-backed loans and homeowners in the government’s foreclosure prevention program, the Making Home Affordable Program (MHA).
• In addition to extending the forbearance period and removing the up-front hurdles for borrowers, the FHA also reemphasized its requirement that participating servicers conduct a review at the end of the forbearance period to evaluate the borrower for all additional, applicable foreclosure assistance programs and notify the borrower in writing whether or not he/she qualifies for any other available option.
• If the borrower does not qualify for any foreclosure assistance option, the servicer must provide the borrower with the reason for denial and allow the borrower at least seven calendar days to submit additional information that may impact the servicer’s evaluation.
• Housing and Urban Development, which oversees FHA, hopes private lenders and government-controlled Fannie Mae and Freddie Mac will adopt a similar policy.

For additional information on the program, including eligibility and requirements, please visit http://www.makinghomeaffordable.gov/.

The full story is here.

Government Likely to Drop the Level at which It will Back Home Mortgages

By Chris Moles
Brokerage Counsel
Intero Real Estate, Inc.

A New York Times article this week revealed that the federal government is set to drop the levels at which it will back home mortgages in September. The sobering news identified that mortgages in Monterey County will likely be slashed by a third and re-set at $483,000. Other California counties will see similar cuts. This could negatively affect the California market because buyers will have to increasingly depend on private loans to purchase in this region.

Current Policy
At present, government backed loans for most bay area counties cap around $729,750. This is substantially higher than the national average and it reflects the above average cost of land in the bay area. Government backed loans are insured by the Federal Housing Administration, so lenders are somewhat protected from default. Lenders face less risk when making these loans to borrowers and borrowers are able to purchase more expensive homes with a smaller down payment and at a lower interest rate then they might otherwise expect. Suffice it to say that many government backed loans are offered at terms that would not be available in a purely private transaction.

The New Proposal
Democrats and Republicans in Congress seem to agree that the federal taxpayer should no longer bear the risk on loans that far exceed the national average for home mortgages. On September 30th, the Congress is posed to cut the levels for government backed mortgages across the board. The new caps will be re-set from county to county with most bay area counties seeing a 15% or so decline. Some anticipate that Santa Clara County’s new government backed mortgage cap may be set at $625,500 – representing a potential loss of more than $100,000 in the purchasing power of the average south bay buyer.

Of course, this could pull prices down as many local buyers are pushed out of the market. California borrowers will likely start to depend more heavily on private mortgages, and this means borrowers will be subject to greater scrutiny about credit worthiness and finances before securing an adequate loan. This also means that buyers may have to settle for higher interest rates and less favorable terms.

Some listing prices will have to decrease to reflect the diminished purchasing power of the average buyer.

The National Association of Realtors Lobbyists
NAR is presently lobbying against these measures in Washington. While it is clear that the government must remake its affordable housing laws, many Realtors argue that an overly simplistic policy based on the national average for home mortgages will have a disparate impact on those living in pricier regions of the country.

However, elected officials have become increasingly blunt in light of political pressure to address the causes of the last housing bubble and the subsequent mortgage crises. The Times reported that, according to a recent White House position paper on government backed mortgages, “Larger loans for more expensive homes will once again be funded only through the private market.”

Assuming Congress does as expected in September, this summer may present the best opportunity to buy and sell for a while.

We hope you enjoy this post by guest blogger, Chris Moles. Thanks, Chris, for providing Intero agents with the most updated legal information in your weekly post.

Adjustments Ease FHA Home Loan Requirements

Here’s a piece of good news for a segment of the real estate market! Many potential buyers in this area, especially first-time buyers, will benefit from these relaxed requirements.

This is great news for anyone looking to buy or sell a home. We have had a number of buyers contact us over the last few months that were just on the cusp of qualifying for an FHA mortgage, but because of the tighter mortgage regulations, were unable to qualify.

According to this article from Inman, FHA lenders Wells Fargo and Quicken Loans have confirmed that they will now lend to applicants with 580 FICOs and 3.5% down payments.

FICOs and FHA: 2 big lenders loosen up

If you're looking to take advantage of the fantastic mortgage qualificatons, give Team Patereau a call at 408-981-2799 and we'll help you get started and get a great deal on a home.